Investment Incentives

According to the Regular Economic Report (World Bank, 2016), Western Balkan economies are still considered economies in transition that have experienced a growing influx of foreign direct investment (FDI) for 2006 – 2014. The average rate of FDI influx to GDP was mainly significant for Montenegro with 14%, for Albania with 8.2% and for Serbia with 7.7%. Meanwhile, the region is viewed with much interest by foreign investors for the advantages it offers, such as: 1) EU membership perspective; 2) macroeconomic stability; 3) strategic location; 4) favorable taxes; 5) diverse economies; 6) cheaper labor costs, combined with 7) a relatively well-educated population (Peter Sanfey, 2016).

However, the consequences of the global crisis were reflected in the Western Balkans after 2008 with considerable decline of economic growth, the recovery of which, according to studies is not yet being recovered to the rates before the crisis. The issue that arises from policymakers and experts for a solution is what will be the sources of growth in the region? One of the alternatives remains attracting sustainable foreign investments in the region in response to comparative advantages of each country. Therefore, countries in the region, including Albania, have taken somewhat aggressive incentive policies to be as competitive as possible in attracting foreign investments. But are these incentives on themselves sufficient to attract productive investments in the economy?

What has been done:

In close cooperation withthe Albanian Investment Development Agency (AIDA), the Secretariat prepared a Technical Note for the purposeto identify the main incentive investment policies for Albania (benchmarking with the regional countries), bring the investors’ perspective on these policies, as well as their specific concerns on the to-do-business climate in the country.

The statistics used for this analysis were consulted with the Bank of Albania, INSTAT, National Business Centre. Around 20 meetings were held with representatives of business associations and major companies that invest in Albania, as well as in theregion. Moreover, reports and the most recent studies by EBRD, OECD, GIZ, DIHA on the investment climate and competitiveness of the Western Balkans and Albania in particular have been considered.

On27 April 2016, the Investment Council discussed the agenda item “Investment Incentives: Albania compared to Western Balkans Countries.” For more information on the Meeting materials, please visit here.